Consistent with last year, economic instability is still influencing many drug and medical device companies to outsource their packaging. To reduce costs as well as risks in uncertain times, some companies do not plan to invest in new equipment in the near future. Instead, they are turning to contract packagers for new-product or specialty packaging needs. "The economic downturn is making people more cautious about taking big gambles on new products," says Ray Johnson, president of Doyen Medipharm Inc. (Lakeland, FL). "As a result, they're not making big expenditures on equipment."

According to the fifth U.S. Packaging Machinery Purchasing Plans Study, conducted by the Packaging Machinery Manufacturers Institute, 54.2% of respondents used contract packagers for at least a portion of their packaging requirements—a percentage consistent with last year's results. Regarding future plans, 29% of respondents planned to increase their usage of contract packagers—an increase of 13.3% compared with last year's respondents. However, 21.5% said they plan to bring more work back in-house—a number double that of last year's respondents.

TURNING TO CONTRACT PACKAGERS

Industry experts agree that companies are being more cautious about where they spend their money. "Considering the times that we're in, people are really taking a hard look at how they're spending their dollars," says Jim Hassenfeld, operations manager for Generic Pharmaceutical Services Inc. (GPSI; Hauppauge, NY). And companies are reluctant to invest in equipment that has limited applications, adds Hal Grossman, GPSI's president. "An example would be cold forming, which is a rather expensive format. Unless you are heavily into products that require this type of packaging, you are going to look for a contract packager that is doing this for a number of companies, and send them your business. Companies are not purchasing new tooling or equipment to do specific types of unique products."

Doyen's Johnson is also noticing a trend toward outsourcing medical packaging for the same reasons. "There's a growing trend for medical companies to outsource not only complex, labor-intensive products, but the commodity products as well," he says. "The reason for that is it reduces their investment in capital equipment, which is particularly important for companies that are coming out with new products. You never know which one is going to take off, so the trend is outsourcing to limit the risk and capital expenditure up front on the development of new products." Doyen's new contract packaging facility offers full dryroom capabilities to a level of less than 5% relative humidity, which is important for the growing segment of in vitro diagnostic test kits.

Grossman agrees that contract packaging is practical for new products. "A project might begin without the company knowing what the long-term impact is going to be," he says. "The manufacturer ultimately may buy the packaging equipment for the product—if it is successful—but if it isn't, he doesn't want to make the investment in packaging equipment."

CLINICAL TRIAL PACKAGING AND BEYOND

Frank Lis, vice president and general manager for clinical supply services, Cardinal Health (Philadelphia), has also seen an increase in outsourcing of clinical trial packaging. "Due to products coming off patent, generic competition, and pricing pressures, pharmaceutical companies are looking to control costs. One way to do this is by outsourcing."

Marjanne Troost Meyer, director of manufacturing for Alcan Packaging, Margo (Montreal; Bethlehem, PA), has noticed an increase in clinical trial packages that are geared toward child resistance. She also sees companies relying on contract packagers for more than just packaging services. "More and more contract packagers are providing a turnkey service," says Troost Meyer, "such as component ordering and/or providing all components from their own internal companies (cartons, inserts, etc.)."

Michael Cotton, national accounts manager for Alcan Packaging, Pharma Center Shelbyville (Shelbyville, KY), and a dedicated resource for supporting the contract packaging market, echoes this sentiment. "There's a shift toward pharmaceutical companies wanting the contract packager to handle everything, including purchasing raw materials." One of the reasons for the shift, he says, is that companies want to reduce their staffing while focusing on their key strengths (R&D and manufacturing), which further reduces costs.

Lis is also aware of this trend in the industry: "The major pharmaceutical companies are looking for contractors that can supply not only packaging services, but distribution, warehousing, quality control, and regulations." To meet this demand, Cardinal Health recently merged the clinical packaging components of PCI Services into its full-service contract pharmaceutical development organization. Lori Feehan, vice president of business development, Cardinal Health Pharmaceutical Development Group, explains that the merger will offer a more complete service to their customers. "We want it to be a seamless operation so you don't have to have a different contract or confidentiality agreement," she explains.

The demand for contract packagers remains healthy, and many industry experts are optimistic for the future. "It's going to be very unpredictable for manufacturers in the next year or two because of the economy," says Hassenfeld. "The contract packaging industry is uniquely suited to help manufacturers ride through these uncertain times."